LAS CRUCES — Pecan growers in the Mesilla Valley and throughout New Mexico could be hurt by President Donald Trump’s escalating trade war with China, but area producers and agricultural experts don’t seem especially worried yet.

China has retaliated against tariffs imposed by the United States on Chinese-made goods by imposing duties of its own on a wide variety of U.S. products, including pecans.

'We don’t depend on the Chinese market'

U.S. growers have worked for years to promote pecan sales in China and get the country to reduce pecan tariffs. Those tariffs were cut from 24 percent in 2015 to 7 percent, stimulating a boom in Chinese demand for pecans.

But in April, China increased its tariffs on U.S. pecans to 22 percent, prompting New Mexico’s two U.S. senators, Tom Udall and Martin Heinrich, to send a letter to U.S. Trade Representative Robert Lighthizer expressing concern about the impact of U.S. trade actions. Then in July, China hiked duties on U.S. pecans to 47 percent.

That would seem to spell doom for pecan growers in New Mexico, the number two pecan-producing state, behind only Georgia. Pecans are the most valuable crop in New Mexico, worth $220.8 million in 2017.

Buy Photo

Jay Hill, points out a few pecans that are almost ready to be harvested in the Hill family orchard, Wednesday November 23, 2016. Hill said they were waiting for a harder freeze before harvesting the pecans.(Photo: Josh Bachman/Sun-News)

The true situation, however, is more complicated.

Relatively few New Mexico pecans are exported to China, or anywhere overseas. Phillip Arnold, president of the New Mexico Pecan Growers Association, said only about 5 to 7 percent of New Mexico pecans are exported to China.

The reason is that Chinese consumers prefer big, meaty pecans still in their shells, which are produced elsewhere. They consume them as a celebratory food around the Chinese New Year, which begins according the lunar calendar in late January or February.

New Mexican pecans, in contrast, are comparatively small and are typically shelled before they are sold. Most are consumed domestically. The Mesilla Valley is the leading pecan-producing region in the state. Doña Ana County alone produces 70 percent of the state’s pecans and is, in fact, the most productive pecan-growing county in the country.

“We don’t depend on the Chinese market,” Arnold said.

Tariff impact unknown until new pecan prices set

China is the biggest foreign customer for U.S. pecans, consuming about one-fifth of the U.S. crop, but most of those are grown in states like Georgia that produce big pecans still in their shells. The Chinese pay a premium price for those pecans, which is why they are exported rather than sold domestically.

“The Chinese tariffs will definitely have an impact, but to what extent it’s difficult to say.”

Sonja Roeder, logistics and inventory manager for New Aces Pecan Co.

China also buys more pecans from Georgia than New Mexico because pecans are harvested earlier in Georgia, so it is better able to supply pecans in time for the Chinese New Year.

Another reason that pecan farmers are restrained in their concern about the tariffs is because pecans are not harvested until fall (after the first freeze in New Mexico). Most are sold fresh. Prices have not yet been set, so it’s too early to tell what the impact of the tariffs will be.

“The harvest hasn’t happened,” said Sonja Roeder, logistics and inventory manager for New Aces Pecan Co., a Las Cruces processor. “The new prices aren’t out. Farmers aren’t at that point yet. Georgia drives the market in what they sell to China. Prices will depend on the next couple months. The Chinese tariffs will definitely have an impact, but to what extent it’s difficult to say.”

Plus, given the volatile nature of the Trump administration’s trade policies, there’s no telling what will happen between now and harvest time. If China capitulates to U.S. demands on trade, the higher pecan tariffs could disappear as quickly as they were imposed.

“My hope,” said Jeff Witte, New Mexico’s secretary of agriculture, “is that we have a little time, because the nuts are still in the trees, for trade negotiations to be beneficial.”

Long-term impact on U.S. pecan markets uncertain

Still, if the tariffs remain in place, they could reduce overall demand for U.S. pecans. If that happens, pecan prices would likely fall, which would hurt pecan growers throughout the United States, including New Mexico.

Furthermore, if producers of big, meaty pecans normally exported to China are forced to sell more of their pecans in the United States, they may have to sell them for less, which would depress prices for all pecans produced in this country.

“I don’t expect there to be a major decline in consumption. The world wants more pecans than we can grow.”

Greg Daviet, pecan farmer

“Because the Chinese created a boom for our industry, and helped push prices up, it is a major concern,” said Arnold, who grows 350 acres of pecans in Doña Ana County.

But it’s also possible that the tariffs could merely change the geography of the pecan trade, causing a shift in where each country gets its pecans, without reducing overall demand.

If China buys fewer U.S. pecans because tariffs make them more expensive, it will likely import more of its supply from Mexico, the leading global producer. The United States imports nearly half of the pecans it consumes from Mexico, but if it exports fewer pecans to China, it may rely more on domestically grown nuts.

“There will be a shifting in which pecans supply which markets,” said Greg Daviet, who farms 280 acres of pecans two miles south of Mesilla and whose family has been growing pecans for a half century. “I don’t expect there to be a major decline in consumption. The world wants more pecans than we can grow.

“I’m in no sort of panic about the tariffs. I don’t like them. I think tariffs are bad. But I would not expect them to have a major impact on the domestic pecan market.”

Pecan trees(Photo: Courtesy)

U.S.-grown pecans could also continue to find their way to China illegally through so-called “grey markets,” intermediate countries such as Mexico or Vietnam that don’t face the same tariffs as the United States. Mexican traders could buy U.S. grown pecans, label them as Mexican, and sell them to China. In the past, U.S.-grown pecans have also found their way into China from Vietnam.

Whether that happens would depend on how tightly China regulates pecan imports and cracks down on efforts to circumvent the tariffs.

Arnold said that a decline in pecan prices could actually help the industry in the long term because lower prices could stimulate increased consumption and enable the industry to expand into new markets and encourage new uses for pecans.

“Prices have been pretty high,” he said. “If prices come down a little, it will help stimulate sales into other markets that will increase sales of pecans worldwide. It could have some benefits, but that’s going to come at a cost.”

Blake Gumprecht may be reached at 575-541-5453, bgumprecht@lcsun-news.com or @blakegumprecht on Twitter.